Wheat trade issue still not resolved for American side

Much of the oxygen surrounding agriculture in the United States-Mexico-Canada Agreement has been used on dairy, but expect wheat to gain increased attention in the coming weeks if some U.S. farm groups get their way.

Newly reappointed U.S. Secretary of Agriculture Tom Vilsack has mentioned USMCA enforcement and wheat several times in recent speeches, and that he wants to “hold Canada to its promises.”

According to the U.S. Trade Representative, Canada agreed in the USMCA to grade imports of United States wheat in a manner “no less favourable” than it accords Canadian wheat, and to not require a country of origin statement on its quality grade or inspection certificate. Canada and the United States also agreed to discuss issues related to seed regulatory systems.

In essence, U.S.-grown wheat can be imported into Canada and receive a Canadian Grain Commission grade, provided that variety is also registered in Canada. This is what is referred to in the above as “no less favourable,” in terms of Canadian and U.S. growers being treated equally on that same variety.

If the wheat variety grown by a farmer is not registered in Canada, it is not eligible for a CGC grade. This applies equally to both Canadian and U.S. farmers, which Canada once again says is in line with the “no less favourable” aspect of the text.

Much of the attention during the USMCA negotiation focused on the above, but Secretary Vilsack may be referring to the last sentence of the USTR text: “Canada and the United States also agreed to discuss issues related to seed regulatory systems.”

U.S. Wheat Associates is one of the groups turning up the volume with new Trade Representative Katherine Tai.

According to a U.S. Wheat Associates’ briefing dated October 29th, 2020, Canada’s variety registration system is “overly burdensome”:

USMCA did not resolve the overly burdensome nature of Canada’s variety registration system (VRS.). The inclusion of criteria unrelated to quality or marketing to achieve a class designation such as agronomic requirements and disease resistance serves as an unnecessary barrier to U.S. wheat varieties being registered. While the VRS has been modernized slightly over the past decade the system still only allows a small amount of U.S. test plot data to be used, which makes it difficult for U.S. developers to register their variety in Canada, especially in cases where the primary purpose of registration would be for importation, where agronomic concerns are irrelevant. This restrictive process of registering U.S. wheat varieties in Canada is not a practical solution. Of current U.S. wheat acres, 18 percent of wheat acres in North Dakota, and 12 percent in Montana are planted to varieties also registered in Canada (CNHR, CWRS, and CPSR).

From the Canadian perspective, a spokesperson for Canada’s Minister of Agriculture and Agri-Food tells RealAgriculture “in accordance with its CUSMA obligations, Canada has also implemented its commitment to remove the requirement for official Canadian grading inspection certificates to indicate country of origin for U.S. grain. These changes address American concerns expressed during the negotiations while at the same time preserving the integrity of the Canadian grain quality assurance system.”

The minister’s office also confirms the wheat issue was discussed during the introductory call between Minister Bibeau and Secretary Vilsack, along with dairy and mandatory country of origin labelling.

“Minister Bibeau noted that Canada is confident in its position and honouring its commitments under CUSMA,” says her spokesperson.

It is unclear whether the U.S. Trade Representative’s office will file a complaint similar to the dairy TRQ disagreement with Canada, but according to one trade analyst, a U.S. challenge would not be surprising.

“We knew that a challenge was coming but I’m surprised that it has come before a change in relative wheat prices made exporting to Canada profitable,” says Carlo Dade, director of the Canada West Foundation’s Trade & Investment Centre. “But on the other hand, I can see them not wanting to wait until prices to change to go through the arduous and time consuming process of launching a challenge.”

Canadian farm groups say Canada has a high bar for quality in terms of variety registration for good market reasons as it pertains to the requirements and expectations of global customers.

“The Canadian variety registration system works for our farmers, our country and our customers,” notes Harvey Brooks, executive director of Sask Wheat.

At the same time, some Canadian groups want to see changes to the variety registration system, but for domestic purposes, not for the sole reason of serving American trade interests.

“We have long felt the variety registration system in Canada works well for a public breeding system of which it was designed for, but it does not work quite as well for the private breeding sector,” says Tom Steve, executive director of the Alberta Wheat Commission. “We are for reforming the variety registration system and finding a more open path for private breeders to increase choice for Canadian growers.”

If the U.S. were to formalize a challenge, Dade says the argument for change could come down to the way Canada proves quality.

“In a world where quantification of quality – measurement of gluten, protein, moisture, etc., – can be easily achieved, and gets easier and cheaper to do every day via on-site testing, relying on archaic varietal registration and visual inspection would appear to be indefensible under any science-based, rules-based trading system,” says Dade.

A source familiar with the Canadian variety registration, who asked to remain anonymous, stated to RealAgriculture “if the U.S. takes away Canada’s ability to guarantee quality by tearing apart the variety registration system, they have numbed our ability to compete in our most profitable markets.”

“Canada clamours for ‘science-based’ trade rules on a seemingly hourly basis. This flies in the face of that advocacy elsewhere. There appears to be no public health, environmental, national security or other reason to bar American grain. Instead, it just looks like rank protectionism,” says Dade.

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